Defaulters can't be given endless opportunities, warns Jaitley
Making a strong case for expeditious adjudication of debt recovery cases, Finance Minister Arun Jaitley today said the doctrine of natural justice of giving opportunity to defaulters to defend themselves need not be carried to an "unnatural extent".
"It is not a usual judicial or quasi-judicial procedure when endless opportunities have to be granted to people to defend cases because if natural justice is carried on to unnatural extents, litigation will become unending. Therefore, efficiency has to be introduced into the recovery procedure as far as the defaulting parties are concerned," he said.
Close to 95,000 cases involving more than Rs 5 lakh crore are pending before debt recovery tribunals across the country.
"So, every case that the litigant manages to delay hurts the larger investment environment of the country because if money of banks are blocked with some defaulters, it prevents the bank from funding others who otherwise could have utilised this investment for fruitful purposes and benefit of the country," he said while inaugurating a seminar on debt recovery organised by the finance ministry.
The minister said the approach of the government has to make the recovery process more efficient and effective by making legislative changes and empowering banks.
"Besides making changes in the insolvency law, the government has made changes in the Securitisation and Reconstruction of Financial Assets and Enforcement of Security Interest (Sarfaesi) law and debt laws. And we have cut short procedures in order to add efficiency to the whole system," he added.
RBI has been very pro-active in this, Jaitley said, adding that it has come out with various policies providing more flexibility to banks to restructure debt and change management.
Recent changes made in the recovery law set time limit for disposal of debt recovery cases and seek to improve ease of doing business by ensuring speedier resolution of defaulted loans.
The highlights of the Enforcement of Security Interest and Recovery of Debts Laws and Miscellaneous Provisions (Amendment) Act, 2016, are expansion of definition of security interest, inclusion of debenture trustees and strengthening of asset reconstruction companies (ARCs).
Besides, secure creditors like banks and financial institutions (FIs), ARCs and debenture trustees will get priority over any other dues, including taxation ones of central and state governments or any local bodies, sources said.
Now, a district magistrate has to decide on applications by banks and FIIs within a specific time limit of 30 days.